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Looming uncertainties impact future of bitcoin in Egypt

Regulation
Dennis WAFULA

According to the CIA World Factbook, Egypt ranks twenty-first in the GDP world ranking just ahead of Taiwan, Nigeria, and Poland. With an impressive GDP of 1,199,013 dollars this economy is nothing to frown at which makes it a high potential market for cryptocurrency like bitcoin. Additionally, Egypt is the most densely populated Middle Eastern country with a population of 95,69 million as of 2016. Internet penetration is another critical factor that puts Egypt on the global map. The state seeks to increase the number of internet users to 50% in a bid to enhance the gross domestic product. The government is lowering prices, expanding broadband connections and increasing internet speed. These efforts coupled with high rates of mobile phone ownership present an unprecedented opportunity for online commerce promoting the need for cryptocurrencies like bitcoin. Another endearing factor that bolsters the case for bitcoin is the rapid decline of the Egyptian pound. Since November 2016, the value of the Egyptian pound has fallen by 50% mirroring a scenario typical in countries rife with political unrest.

Unbanked population

August 2017 marked the first bitcoin trade in Egypt, a remarkable feat for a nation where many people still do not have bank accounts. The Financial Times reported that only a meager 32% of the population have bank accounts, the majority being civil servants who use debit cards to draw salaries at month's end. On the flip side electronic payments are gaining ground with electronic payment in shops and other advancements. This move paves the way for cryptocurrency as the market becomes more acquainted with electronic payments. Cryptocurrencies make it possible for people to trade without the need for traditional banks or the central bank. This level of anonymity makes bitcoin an ideal choice particularly for the unbanked.

Online commerce

Just like most of Africa, Egypt is catching on to online trade as evidenced by the many online shopping platforms that are cropping up. Take, for instance, Jumia that offers a wide array of items delivered right to customer's doorstep. Other favorite websites include Hipanema, Mofkera, Indian Elephant, Planet Boho and Dreadlocks. All these sites entice Egyptians to shop for their favorite items from the comfort of their homes. Fortunately, the government is not averse to allowing citizens to buy online freely without censorship or fear mongering. As this space develops, it will popularize bitcoin as the currency of trade.

Financial investment

Bitcoin emerged after the global economic meltdown, a time when people's confidence in financial institutions eroded. More so, the burgeoning millennial population is institution-weary and would, therefore, prefer to put their earnings away from government's reach. While bitcoin is an alternative currency that can efficiently purchase items, the majority of users use it as investment tokens. The lack of central authority in bitcoin makes it easy to get around capital controls. Buying and selling bitcoin is another way of building an investment portfolio which is a welcome idea for people who understand money markets. A lot of this growth is spurred by the Asian market especially given that nearly 80% of bitcoin ownership comprises of chinese investors. Similar to the dollar and other currencies, bitcoin is prone to gaining and losing so people who wish to invest must be ardent in studying the market.

Unregulated currency

Unfortunately, bitcoin is highly volatile, and there are no laws for cryptocurrencies in Egypt. During the August 2017 launch, the Central Bank of Egypt (CBE) declared that it would not issue legislation to promote the trading of bitcoin within the country. Therefore, selling in bitcoin was the sole responsibility of its users and not the banking sector. This situation makes it difficult for merchants to accept bitcoin until the government provides proper direction. Bitcoin Egypt founder Rami Khalil acknowledges that lack of regulation renders trading with bitcoin illegal and this could attract legal hurdles and penalties. Magdy Ashour, the advisor to the Grand Mufti of the Republic, called trading in bitcoin "Haram" which is Islamic speak for forbidden. The mystery behind the operations of bitcoin is yielding fear to the extent that Ashour surmised that this currency could potentially finance terrorism. On the heels of violent terror attacks around the world, such declaration is quite alarming. The Arab Spring notwithstanding, Egyptians are law-abiding and would, therefore, stay clear of actions that contradict the rule of law.

Government concern

Since the introduction of cryptocurrencies, governments around the world are mulling over classification and regulation of bitcoin. As the value soars in many parts of the world, investors are captivated and want a piece of the action. However, not knowing how to manage the currency regarding curbing inflation and other issues has thwarted its usage in the mainstream economy. Therefore, some governments like Egypt have chosen to abolish bitcoin until further notice. Presently, CBE only accepts the Egyptian pound as legal tender, a move that stifles the growth of bitcoin. It is ironic for a government that prides itself in liberating its people through economic prosperity would refute a nascent idea with such massive potential.

Ban of bitcoin

In December 2017, the government banned the use of bitcoin in Egypt. Mohamed Omran, the Head of the Egyptian Financial Supervisory Authority (EFSA) called the trade illegitimate and declared that more details would ensue. The nature of bitcoin triggered this move; it cannot be controlled by any agency and hence tricky to manage. The uniqueness of bitcoin is that its value relies upon people's confidence in it, which means the masses are in control, not the government. Threatened by this freedom, the Egyptian government chose to put a lid on this virtual currency. Sheikh Shawki Allam, the Grand Mufti, supported this ban said that bitcoin brought on risks of fraudulence and cheating.

Bitcoin mining

As citizens await the next move from the government, the more daring ones are delving into the world of underground mining. The mining community is unwavering in their hunt for investment opportunities that are free of unnecessary regulation and inevitable corruption. Miners use their computing prowess to decipher complex algorithms to confirm and process transactions on the bitcoin blockchain. Miners receive fresh bitcoins that correspond to their level of effort. Besides bitcoin, Ethereum is the most popular cryptocurrency owing to the ease of acquiring mining hardware within the country.

Conclusion

This North African country has massive potential for bitcoin to thrive and propel Egyptians to a promising digital future. The ban is still pending further directive from the Egyptian government. Only time will tell if bitcoin has a future in Egypt or not. Hopefully, the government will come around and stop treating bitcoin like narcotic drugs. Citizens deserve to partake in this treasure before it is too late.


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